You weren't too frightened to walk the streets of Melbourne, go out for breakfast or dinner last night while you are here?

TREASURER:

I had a very pleasant evening. It is great to be here. It is always great to be here in Melbourne.

FAINE:

Excellent. Now, the Victorian Government your essential partners in any railway link to the airport, are you including the Victorian Government in discussions about the preferred option?

TREASURER:

Of course, the Prime Minister has written to the Premier…

FAINE:

At midnight last night…

TREASURER:

We wrote to him, this is the plan. In last year's Budget we put $30 million to do the feasibility study into the Tulla Rail. So, we have been flagging our intention very clearly that this is a national priority we think and today we are making it very clear, backing that up with a commitment to put $5 billion down in a partnership with the Victorian Government, in a very new type of partnership. Not the old partnership where you just chuck money out the door and say good luck with that but to genuinely partner in a project, to see the project all the way through together.

FAINE:

If it is a genuine partnership you don't send a letter at midnight the night of the announcement, after the papers have already got the story. You tell The Herald Sun before you tell the state government.

TREASURER:

I don't think the Premier is that precious, Jon. Do you?

FAINE:

I don't know whether he is precious or not but if you are sincere about working with them that is not the way to do it, is it?

TREASURER:

Jon, I think you are overreacting. We want to do it in a partnership with them…

FAINE:

We want the best outcome for Victoria.

TREASURER:

Exactly and I would hope that is what the Premier wants too. This is a great opportunity…

FAINE:

…but you sent him a letter at midnight after you have given a briefing to the media.

TREASURER:

Jon, I don't think people care about they care about building a railway and we are going to build a railway with the Victorian government that is 50 years overdue.

FAINE:

Yes.

TREASURER:

And we are going to get on with it. Our money is down. It is going to be one of the most innovative, national infrastructure projects we have seen. The Commonwealth government, the Turnbull Government is saying, we agree Victoria, this is a project of national significance and we are in. We are all the way in and we are going to stay all the way in.

FAINE:

Have you got a preferred option for which way it should go? Because there is at least a dozen different versions.

TREASURER:

There are a number of different potential routes and the feasibility study is looking exactly at that. That route has to be determined not just by engineers but it also has to be determined by city planners, be determined by housing economics and all of these sorts of things. That is the way we do these projects. We have got a number of these projects we are running in NSW at the moment, a very different style of partnership…

FAINE:

In fact you have a lot of them in NSW. We have noticed that.

TREASURER:

And largely around Western Sydney Airport. We see the Tulla Rail as big, and in fact it's bigger than that project in NSW and it is a project of national significance so it is very important for Victorians. It is going to change the shape and future and amenity of this city in a massive way and so we are keen to make it very clear that we are starting the firing gun on this. Let's get on with it and let's have a great partnership, an innovative partnership. Let's not have a partnership where the Commonwealth is seen as an ATM for infrastructure but a genuine partner in building this thing for the betterment of the city and its citizens.

FAINE:

Even with this project and the $5billion from the Budget that is attached to it, you are still spending money on New South Wales and specifically Sydney infrastructure at three times the rate that you are in Melbourne.

TREASURER:

Well, this bring to over $17 billion our infrastructure here in Victoria…

FAINE:

Which includes money that you have locked away for a tunnel that the people voted against at the last state election.

TREASURER:

And if people vote differently at the next election then we will be building that with a Guy Government.

FAINE:

And if they don't?

TREASURER:

Well, we have that there as a contingent liability to build it. We think it is an important project for Victoria.

FAINE:

And it will one day be built. We all understand that.

TREASURER:

This Government spent a billion dollars not building it. So, that is something for them to defend.

FAINE:

Yes, because your colleague Michael O'Brien the then Treasurer signed a letter of comfort that committed the taxpayers to something that wasn't going to be built.

TREASURER:

Come on Jon. They spent a billion dollars not building a road, you can't give them a leave pass for that. What we are doing here with Tulla Rail is the single biggest announcement I will be making in this year's Budget on infrastructure. There will be more and I will have more to say about that at the time of the Budget. We understand the pressures that are happening in Melbourne. The Tulla Rail, not only is it great for the millions of visitors who come through Melbourne and the people who use the airport but think of the people who work at the airport, who work along the route, the traffic that is taken off the freeway. A freeway that we are actually spending the majority of money upgrading and widening by the way.

FAINE:

Tollway – not Freeway.

TREASURER:

We are building roads in Victoria. We are building railways in Victoria. We are building infrastructure in Victoria to relieve the pressure which is clearly here and we get that. Our local members, whether it is Chris Crewther, or Julia Banks, or Jason Wood, or Michael Sukkar, they have all been very passionate about this – Kelly O'Dwyer, who is part of the Treasury team…

FAINE:

Because they know they may lose their seats if you don't lift your game in this state.

TREASURER:

No they are passionate about the future of Victoria and Melbourne, and it being a world class city…

FAINE:

They know how we are being treated as second class citizens compared to the people in Sydney.

TREASURER:

And they have advocated for change and they have got it.

FAINE:

So, we have got a situation now where you are committed to something. Heavyrail? Lightrail? Monorial? Skyrail? Do you care?

TREASURER:

I don't think it will be a monorail, Jon, but the feasibility study is what is now the focus of what shape and direction this project takes. It will take some time to get it right, there is no doubt about that.

FAINE:

Do you rule anything out?

TREASURER:

We want the best possible rail link to the airport.

FAINE:

Heavyrail? Lightrail?

TREASURER:

Again, I am not an engineer. We are going to let the feasibility…

FAINE:

Have you got an instinct on this? A gut feeling?

TREASURER:

What we are saying, the current estimates are that the project is around about a $10 billion cost. We also welcome private sector investment in this as well.

FAINE:

In railways?

TREASURER:

Yes, it does happen, Jon. The private sector actually invests a lot of money in railways around the world, including in Australia. They do know something about that.

FAINE:

And in the UK they are retreating.

TREASURER:

What we are seeing in Australia and with projects also in NSW we are seeing that investment. So, Jon, you don't rule any of that out either. So, Jon we are going to get the best project, the best route, the thing that is going to best shape this city and support its citizens to get about and improve the amenity in the community of this city as well. This is a city changing project of national significance.

FAINE:

Alright, very quickly I do have some other pressing engagements this morning. Tony Abbott has been riding a bicycle through the Latrobe Valley. I understand the Prime Minister is on his way down there. Is he chasing Tony Abbott?

TREASURER:

No, the project the Prime Minister is announcing there is actually really exciting. It is creating jobs in the Latrobe Valley for people who are working in the brown coal sector. This is about new technology, partnering with the Japanese to come up with, not only carbon capture and storage but a way of converting this into hydrogen and making it a fuel of the future. We have $100 million going to that project over the next four years, we are investing in jobs in the Latrobe Valley. The unemployment rate in the Latrobe Valley has come down a bit.

FAINE:

It is very speculative almost, isn't it? It's experimental.

TREASURER:

It's investment in science and technology.

FAINE:

It's not proven though, this technology.

TREASURER:

That's why you invest in science and technology and research. That is how you prove it.

FAINE:

Do we think that we can do better than anybody else anywhere in the world on this?

TREASURER:

Well, we are going to give it a red, hot go.

FAINE:

Ok, let's wait and see what happens. And finally The Financial Review reports today that China has cancelled the annual trade expo that the Australian and Chinese Government have cooperated on for years and have been refusing requests by Ministers in your government for visas to visit China. We have a trade war now with China do we not?

TREASURER:

No, that is nonsense Jon and I think dramatizing events in that way I don't think is very helpful. It hasn't been cancelled. My advice is that dates have not been yet settled and there will be further discussions about those. Minister Ciobo will actually be up in China at the end of the year leading a trade delegation up there and there will be a major Australian presence and exhibition there later in the year. I was just there last year with Minister Ciobo in August. I see my Chinese counterparts at the G20 all the time. I will be there again at the G20 in a few months' time and we will take further opportunities then. So, no, Jon, I don't think it is helpful to talk down the relationship with China. We certainly don't. We have an outstanding relationship with China, they are our biggest trading partner. You have millions of visitors who are coming here every year, international students who are supporting the Victorian economy in particular. That will continue because we are managing the relationship well.

FAINE:

Happy Birthday on Budget day. Thank you for coming in this morning we look forward to speaking to you again.